Diminishing Party Assets

UMNO accounts handed in by the outgoing Treasurer make gloomy reading, that's for sure. How bad, no one knows. In fact, few in Malaysia can tell how much of the billions in shares still remain in the party.

On June 16, outgoing party Treasurer (and Finance Minister) Daim Zainuddin handed the UMNO accounts over to his boss, Dr. Mahathir Mohamad before disappearing into private life.

Since the Prime Minister had gone through the books, several things have happened.

Firstly, Dr. Mahathir has himself taken over the post of Finance Minister and says he is in no hurry to pass it to some one else. Tradition is that it goes with the post of UMNO Treasurer, which means he also takes charge of party assets.

Then 11 days later, he announced, for the first time, that Malaysia had lost US $250 billion during the Asian financial crisis in 1997. This is 2-1/2 times Singapore's total foreign exchange.

Of this, US $50 billion was attributed to the share-market fall, which doesn't augur well for UMNO shares.

When Dr. Mahathir became Prime Minister in 1981, he put Daim in charge of Fleet Holdings, UMNO's investment arm, whose objective was to accumulate wealth for the party.

This was the reason why the two posts - finance minister and UMNO Treasurer - were held by the same person in at least 17 of the past 20 years.

It was a golden era of fast growth - through industrialisation and privatisation - and UMNO wanted a lion's share of the new wealth. With Dr. Mahathir and Daim as a team, optimism and wealth rose.

Renong, United Engineers (M), and a whole range of banks, media, hotels, property, infrastructures, etc. all came under control by Fleet Holdings and extensively referred to as "UMNO shares."

Optimism flowed from the belief that UMNO was a wealthy party. Today much of it has waned.

In fact, few UMNO members have even the slightest clue how many shares their party really owns - by holding companies name or on its behalf by individuals.

Today's lack of transparency stems partly from a court ruling that UMNO was an illegal organisation.

This ruling provided Mahathir the opportunity to reconstitute the party as the UMNO Baru (New UMNO), while purging his rivals.

In the process of being legally disestablished, UMNO appeared to lose direct control of its vast corporate holdings.

In fact, UMNO corporate entities funneled resources to particular individuals, building new bases of wealth and support while stripping the UMNO holdings of assets that might be claimed by the breakaway forces.

These proxies are close friends and associates of UMNO leaders, especially Daim, Treasurer and Finance Minister.

In recent years, some of the what used to be "UMNO shares" were now - during recent years - referred to as Daim-linked counters.

Today party rank-and-file can hardly distinguish what are "Daim shares" and what are "UMNO shares."

Said Mr. Lim Kit Siang, leader of the opposition Democratic Action Party: "Once he became financial czar, you could never tell where UMNO companies ended and Daim companies began."

Within UMNO, he was Treasurer, exercising direct and indirect control over a substantial network of holdings, primarily through UMNO's Fleet Holdings.

At the same time, Daim continued to pursue his own private business interests.

Some insiders say Dr. Mahathir was shocked to discover the poor state of the party's finance - and his decision to retain the finance portfolio and party Treasury is partly due to this.

"He wants to repair the damage before the next election (due in 2004)," said one source. If true, Dr. Mahathir has three years to do something that depends on stock market volatility. So apart from Anwar and the country's economic health, he faces a third problem.

That is the diminishing party assets, especially when members start raising questions about them. They may force him to start on checking Daim's tenure to make sure there was not hanky panky.

The first was to sort out what are UMNO's shares and what belong to Daim or his cronies.The second is to find out how to rescue them. Many of the companies it controls are either deeply in debt or have negative flows.

Some desperately need bail-out.

Kuala Lumpur is also abuzz with speculation about a book due to be released shortly about Daim. It was by the same author of "50 reasons why anwar should not be prime minister."

That book led to the arrest and imprisonment of former Deputy Prime Minister Anwar Ibrahim.

Is this an omen for Daim?

Seah Chiang Nee